Message to NASD Member Firms From Mary Schapiro, Chairman & CEO, NASD - 4/26/07
Dear NASD Member,
I wanted to provide an update on two recent actions taken by the NASD Board of Governors earlier this month. The changes are in keeping with NASD's commitment to improving regulatory efficiency for all firms.
As you may know, NASD created the Small Firm Rules Impact Task Force last September to examine how existing NASD rules impact smaller firms. I am pleased to announce that the Board adopted two proposals recommended by the Small Firm Rules Task Force. These proposals — the first round of actions to come from this important effort — will now be taken to the SEC and will go through the standard rulemaking process.
The first proposal would eliminate the requirement that firms verify designated contact persons on a quarterly basis for the NASD Contact System.
The Task Force found the quarterly review burdensome and unnecessary, in large part because the individuals seldom change. When the new amendment is adopted, member firms will be required to verify contact information on an annual basis only. Firms will still need to update contact information promptly, but not later than 30 days following a change.
The second proposal would create an exception to NASD Rule 2210 (Communications with the Public), which requires review by a registered principal of an NASD member firm and approval in writing of all sales material prior to use.
When adopted, principal review will no longer be necessary if a broker-dealer is using a distributor's sales material already on file with NASD. The proposed amendment approved by the Board will eliminate dual review by registered principals, saving retail firms numerous hours spent reviewing sales materials previously approved by a registered principal at the product distributor.
These two actions are concrete steps NASD is taking to reduce the regulatory burden for all members. In the coming months, I will notify you of other recommendations from the task force once they are approved. I look forward to updating you on NASD's continuing efforts to streamline regulation without weakening investor protection.
Mary L. Schapiro
Chairman and CEO